California's giant Public Employees' Retirement System, one of the world's largest pension funds, has instructed its Washington D.C. legal adviser to examine dealings between its board and staff and a Los Angeles-based venture capitalist who pled guilty Thursday to bribing New York State officials.
The development, reported by the Los Angeles Times, came just 24 hours after financier Elliott Broidy pled guilty to paying $1 million in bribes to four New York state pension officials to get $250 million in pension fund business, according to New York Attorney General Andrew Cuomo.
Broidy's admissions were the latest development in a series of state and federal inquiries into how public employee pension funds, including the massive CalPERS, reach decisions on how to allocate their funds among private investment firms. Broidy's company, for example, has received $50 million from CalPERS.
Over the last decade, Broidy and his wife, who are longtime national and state fundraisers for the Republican Party, have made some $900,000 in campaign contributions to officials who were seeking or held statewide political offices at the time, including two Calpers board members.
CalPERS spokesman Brad Pacheco told the Times, the pension fund is reevaluating its partnership with Markstone, Broidy's venture capital firm, which specializes in Israeli investmens.
Broidy -- who stepped down in the spring as a board member of the Los Angeles Fire and Police Pensions fund after receiving inquiries from the U.S. Securities and Exchange Commission -- also has agreed to cooperate in a widening federal probe of corruption in public pension investments--an investigation which began in New York, but now includes inquires about practices among California state pension funds.
Even though Broidy is cooperating with the still unfolding probe, his guilty plea to a felony charge of rewarding official misconduct -- including bribing one official by helping finance his B-list movie and giving $90,000 to another one's girlfriend -- could mean up to four years in prison.
Broidy -- who also served on the board of trustees for the Simon Wiesenthal Center -- also resigned as chairman of Markstone Capital Group, agreeing to forfeit $18 million to the state of New York.
"It was an old-fashioned case of payoffs to state officials," Cuomo said. "This case is effectively bribery of state officials."
Broidy, a longtime fixture on the Los Angeles' Republican fundraising scene, served as a former committee chairman for the Republican National Committee and appointed to the board of trustees of the John F. Kennedy Center for the Performing Arts in 2006 by George W. Bush.
Broidy's plea marks the fifth criminal plea in the ongoing investigation into whether decisions over how to invest retirees' money were illegally influenced by money and politics.
A spokesman for Mr. Broidy said in a prepared statement: "Mr. Broidy regrets the actions that brought about this course of events, but is pleased to have resolved this matter with the NYAG and will be cooperating in the ongoing investigation."
According to officials, Broidy also admitted to spending $75,000 to take comptroller's officials on lavish trips to Israel and Italy. He said payments were concealed in false invoices submitted to the comptroller's office.
He said he gave $300,000 to help finance a B-list movie called "Chooch," linked to a senior executive with the state pension fund. In addition Broidy paid over $90,000 to the girlfriend of a high-ranking OSC official from April 2004 through October 2005. The payments were used to cover the girlfriend's living expenses and rent. Broidy also covered the girlfriend's hospital bills. Broidy also agreed to pay $5,500 a month to a relative of the girlfriend beginning in October 2003, for a total of $44,000. These payments were concealed through a sham loan agreement between Broidy and the relative.
According to the Los Angeles Times, Broidy has received four subpoenas from the Securities and Exchange Commission since May, three seeking documents and one calling on him to appear.
At least one subpoena called on Broidy to disclose all of his contacts with Alfred J.R. Villalobos, a middleman who has received at least $70 million in fees to help investment managers get business at the California Public Employees' Retirement System and the California State Teachers' Retirement System, according to the Los Angeles Times.
Broidy also came under scrutiny for a vote he cast as one of Mayor Antonio Villaraigosa's appointees on the Los Angeles Fire and Police Pensions board. In July 2007, Broidy voted to invest $30 million in a fund managed by CIM Group Inc., which is an investor in Markstone. CIM invested $500,000 in the firm in 2004.
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